A Tech has fixed costs of $9 million and profits of $5 million. Its competitor, Z Tech,
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Question:
A Tech has fixed costs of $9 million and profits of $5 million. Its competitor, Z Tech, is roughly the same size and this year earned the same profits, $5 million. But it operates with higher fixed costs of $8 million and lower variable costs.
Required:
What is the degree of operating leverage (DOL) for each company? (Defined here as 1 + Fixed costs/Profit.)
Related Book For
Essentials of Investments
ISBN: 978-0077835422
10th edition
Authors: Zvi Bodie, Alex Kane, Alan J. Marcus
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